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Credit standards tighten, mortgage lending hits record-low

The Wall Street Journal recently reported that mortgage lending fell to its lowest level in 16 years in 2011, due to weak demand for mortgages and tighter lending standards.

Federal regulators said earlier this week that banks funded about 7.1 million mortgages last year – a 10 percent decline from 2010. The lending rate hasn't been that low since 1995 when banks issued 6.2 million mortgages.

The report went on to say that lenders might be more cautious since the housing crisis in the mid-2000s, despite the fact that, in the last six years, median credit scores have increased by about 40 points.

William Dudley, president of the Federal Reserve Bank of New York, gave a speech earlier this week and said that with more conservative credit standards, lower mortgage rates will have less powerful of an impact than normal. He went on to say that serious attention needs to be brought to the fact that homeowners are having difficulty obtaining mortgage credit.

David Blitzer, managing director and chairman of the index committee at Standard & Poor's, told HousingWire that fewer consumers have been falling behind on a variety of payments this year.

"For the housing market, there are still a substantial number of loans outstanding that defaulted in the past and that segment of the market is still of concern," Blitzer said to the news source. "But for 2012, the drop in mortgage default rates is a good sign for the housing market and the consumer."

While the housing market – and overall economy – attempt to make a full recovery, lenders should ensure that they have mortgage loan software. This will help to create a repayment plan that can be catered to each individual borrower. Then, with the added assistance of an amortization calculator, borrowers will be less likely to fall behind on monthly payments.